Date: 19991105
Docket: T-294-96
BETWEEN:
APOTEX INC.
Plaintiff
- and -
MERCK & CO., INC. and
MERCK FROSST CANADA INC.
Defendants
REASONS FOR ORDER
LEMIEUX J.:
INTRODUCTION
[1] The subject matter of this proceeding is Canadian Letters Patent No. 1,275,349 (the Merck patent). The Merck patent was issued on October 16, 1990 and covers claims for the invention of certain compounds known as enalapril and enalapril maleate. The latter compound is a stable salt of enalapril which, once combined with a carrier (consisting of pharmaceutically inactive excipients and adjuvants) into tablets or liquid dosage form, produces a composition suitable for dispensation as a prescription drug for the treatment of hypertension and congestive heart failure. The Merck patent includes claims for pharmaceutical compositions with the compounds, and claims for the use of compounds as anti-hypertensitives. In total, the Merck patent has 17 claims: the compound claims (claims 1 to 5), the pharmaceutical composition claims (claims 8 to 10), and claims to the use of the compounds as anti-hypertensitives (11 to 17).
[2] In this proceeding, Merck and Co. Inc., and Merck Frosst Canada Inc. (Merck), as defendants, seek, pursuant to paragraphs (c) and (f) of Rule 221(1) of the Federal Court Rules, 1998, to strike out paragraph 14 of Apotex's defence to Merck's counterclaim in this action in which Apotex is the plaintiff. In the alternative, Merck seeks particulars from Apotex of its defence. Apotex, in the contested paragraph pleads that if the material acquired by Apotex was not licensed and the principle of licensee estoppel is inapplicable as an alternative, the Merck patent and the claims are invalid, void, and of no force and effect, on a number of grounds. Merck says Apotex cannot raise the issue of invalidity of the Merck patent in defence to Merck's counterclaim because its validity has been conclusively determined by this Court and by the Federal Court of Appeal. As a result, Merck claims paragraph 14 is frivolous, vexatious as well as an abuse of process and should be struck.
BACKGROUND " PREVIOUS ACTIONS
(a) Merck v. Apotex - T-2408-91 (the '91 action)
[3] On September 20, 1991, Merck brought an action in this Court against Apotex alleging infringement of their exclusive rights under the Merck patent seeking the following relief:
| (a) a declaration that the compound claims (1 to 5), the pharmaceutical composition claims (8 to 10), and the claims for the use of the compounds as anti-hypertensitive (11 to 15) have been infringed by Apotex; |
| (b) an injunction restraining any further infringement; |
| (c) damages or an accounting for profits; |
| (d) delivery up or destruction of all compositions that infringe the Merck patent; and |
[4] Apotex replied with the following defences:
| (i) Apotex's product was manufactured from bulk product made in Canada prior to the grant of Merck's patent. Therefore, section 56 of the Act provides a defence to the claim of infringement; |
| (ii) the pharmaceutical composition claims (8 to 10) are invalid because they contain no inventiveness beyond that embodied in the compound claims (1 to 5); |
| (iii) claims 8 to 17 are invalid because the specification of the Merck patent is deficient; |
| (iv) claims 8 to 17 are invalid because the discovery claimed is for a medical treatment and not for an invention as defined in the Patent Act; and |
| (v) claims 8 to 17 are invalid because they are redundant of each other. |
[5] By counterclaim, Apotex sought a declaration that claims 8 to 17 in the Merck patent are invalid.
[6] Merck's action went to trial. MacKay J. of this Court issued written reasons on December 14, 1994, 59 C.P.R. (3d) 133. MacKay J. allowed the action and dismissed Apotex's counterclaim. On December 22, 1994, the following formal judgment was entered:
| THIS COURT ORDERS AND ADJUDGES that: |
| 1. Claims 1 to 5 and 8 to 15 inclusive of Canadian Letters Patent No. 1,275,349 have been infringed by the Defendant. |
| 2. The Counterclaim of the Defendant seeking a declaration that claims 8 to 17 inclusive are invalid, is dismissed, with costs. |
| 3. The Defendant, by its officers, directors, servants, agents, employees, or otherwise, is hereby restrained and enjoined from infringing claims 1 to 5 and 8 to 15 inclusive of Canadian Letters Patent No. 1,275,349, and in particular from manufacturing, using, offering for sale and selling, in Canada or elsewhere, APO-ENALAPRIL tablets or any tablets or other dosage forms containing enalapril maleate as an active ingredient, whether such manufacture or sale be from |
| (a) bulk enalapril or enalapril maleate acquired prior to the grant of the patent, or |
| (b) any quantities of bulk enalapril maleate acquired after the grant of the patent. |
[7] Apotex appealed MacKay J.'s judgment to the Federal Court Appeal. MacGuigan J.A., on behalf of the Court, issued reasons for judgment on April 19, 1995, 60 C.P.R. (3d) 356. MacGuigan J.A. at page 360 of the reported reasons described the activities of Apotex in respect of enalapril as taking place against the background of proposals of the Government of Canada to end compulsory licensing and to extend the rights of patentees and in the context of Apotex's effort to obtain an NOC from the federal Department of Health which Apotex obtained in September 1993. Apotex began to purchase enalapril maleate in bulk form from two related Canadian manufacturers, Delmar Chemicals Inc. (Delmar) and Torcan Chemicals Ltd. Since the purchase of enalapril maleate was (for the most part) manufactured before the issuance of Merck's patent, Apotex was of the view that section 56 of the Act would enable it to use the purchased product without liability to Merck. Apotex purchased and stored enalapril maleate in bulk form because bulk enalapril maleate has a very long shelf life. In tablet form, enalapril maleate has a shelf life of only two years.
[8] MacGuigan J.A. said this at page 363-364:
| As I have said, there was no issue as to the chemistry of the invention, and, moreover, the appellant did not contend that its compound Apo-Enalapril did not infringe the patent's claims, apart from the saving effect of s. 56, although it did raise issues as to the validity of composition claims 8-10 and of use claims 11-17. |
[9] On appeal, Apotex contended that it was entitled under section 56 of the Act to use and sell its APO-ENALAPRIL tablets on the ground that it was simply using and selling enalapril maleate made in Canada that it purchased or acquired before the issuance of Merck's patent on October 16, 1990.
[10] The Federal Court of Appeal overturned MacKay J. on the section 56 defence. It concluded Apotex was protected, under section 56 of the Act, in respect of purchases prior to the issuance of the Merck patent.
[11] However, the Federal Court of Appeal upheld MacKay J. on three specific lots (lots numbered P-65478, P-65479 and P-65480) which were packaged by Delmar in September 1990 but were subsequently found by Apotex's quality control staff not to meet its (Apotex's) standards of purity. The Federal Court of Appeal held re-processing after the Merck patent issued did not fall within the scope of the section 56 protection.
[12] The Federal Court of Appeal also dealt with another issue which was before MacKay J. and concerned a further lot of enalapril maleate. MacGuigan J.A. expressed the issue in the following way at page 376:
| There was a further lot of enalapril maleate which Apotex acquired from a foreign customer of Delmar after the issue of the patent. Delmar was granted a compulsory licence on April 24, 1992, to manufacture enalapril or enalapril maleate in Canada, with royalties to Merck. That licence ceased to have effect by section 12 of the Patent Act Amendment Act, 1992, S.C. 1993, c. 2, and was extinguished as of February 14, 1993. Subsequently on March 10, 1993, Apotex purchased 44.9 kg of bulk enalapril maleate which Delmar had manufactured under licence and sold to its foreign customer. The appellant submitted, that, as the acquirer of licensed enalapril maleate powder, it had an implied licence from Merck to produce dosage form enalapril maleate from the powder. |
| The trial judge held that there was no infringement in Apotex's producing the final dosage form from bulk product it held only on consignment, during the time when Delmar's licence was in effect under the law. There was no cross-appeal by the respondents on this holding. |
| The Trial Judge continued (...) [page 164 C.P.R.]: |
| On the other hand, Apotex has no right, derived from or under the compulsory licence to Delmar, to produce tablets for use as an anti-hypertensive from the 44.9 kg of bulk enalapril maleate purchased in March, 1993, after the licence to Delmar was terminated by statute. That result is not based on extinguishment of any rights Delmar may have had, under the licence, in accord with the statutory amendment which terminated its licence effective February 14, 1993. Rather, it is based on the lack of any right in the defendant to use the invention after the grant of the patent. It had not acquired this lot of enalapril maleate before the grant of Merck's patent and so has no claim to immunity by reason of s. 56 of the Act. |
| Again, I am in agreement with the conclusion of the learned trial judge, though I should prefer to rest my conclusion on the extinguishment of Delmar's rights and so of any right in the appellant, rather than on a return to section 56, which I am not at all certain is in play on this point. |
[13] At page 376 of the reported case, MacGuigan J.A. for the Federal Court of Appeal, turned to the issue of the validity of the composition and use claims in the Merck patent. He approached the matter this way:
| Considering that the appellant's pleas as to the validity of the composition and use claims were only an alternative defence to the claim of infringement, I am of the opinion that this might well have been the termination of the case, had not the appellant also sought by counterclaim a declaration that the composition and use claims of the patent (claims 8-17) are invalid. I believe that this invocation of declaratory relief makes it incumbent upon the court to proceed to consider this matter. [emphasis mine] |
[14] The Federal Court of Appeal went on to deal with Apotex's attack on Merck's patent on the grounds of absence of any claim to novelty or inventiveness in the composition claims (8-10), and questions of ambiguity and insufficiency relating to section 34(1) and redundancy in respect of the other claims.
[15] MacGuigan J.A. concluded at page 386 that the whole of Apotex's counterclaim failed.
[16] As a result of the Federal Court of Appeal's decision, the formal judgment of the Trial Division of December 22, 1994, was varied to read in paragraph 1:
| 1. Claims 1 to 5 and 8 to 15 inclusive of Canadian Letters Patent No. 1,275,349 have been infringed by the defendant in relation to lots P-65478, P-65479, P-65480 of bulk enalapril maleate, and the 44.9 kilograms of enalapril maleate which was purchased by the appellant from Delmar Chemicals Inc. in March 1993 after the compulsory licence held by that company was extinguished by statute. [emphasis mine] |
[17] Paragraph 2 of the formal judgment was unchanged. Paragraph 3 was changed to read:
| 3. The Defendant, by its officers. . ., is hereby restrained and enjoined from infringing claims 1 to 5 and 8 to 15 inclusive of Canadian Letters Patent ... and in particular, from manufacturing, using, offering for sale and selling, in Canada or elsewhere, APO-ENALAPRIL tablets or any tablets or other dosage of forms containing enalapril maleate as an active ingredient manufactured from bulk enalapril maleate contained in lots P-65478, P-65479, P-65480 as well as from the 44.9 kilograms of enalapril maleate, referred to in paragraph 1 hereof. |
[18] Applications for leave to appeal to the Supreme Court of Canada, by both plaintiffs and defendant, were dismissed by order of that Court on December 5, 1995.
(b) Apotex's motion for reconsideration " January 31, 1997
[19] The purpose of Apotex's motion to reconsider was to enable Apotex to attack the validity of claims 1 to 5 and 8 and 11 in the Merck patent. The focus of the attack was on claim No. 1 based on overclaiming and inutility, namely;
| (a) the number of compounds covered by claim 1 is so large that it is impossible that anyone could ever make and test all of them; |
| (b) there was no sound basis for predicting the pharmaceutical utility of the entire class of compounds covered by claim 1; |
| (c) in fact, many, if not most, of the compounds covered by claim 1 are not useful. |
| (d) claims 8 and 11 by reason of what was said about claim 1 and because claims 8 and 11 are dependent upon claim 1. |
[20] In its motion, which came before MacKay J., Apotex argued that it had no ability to manufacture and sell any other member of the general class of compounds covered by claim No. 1 other than enalapril maleate and, because of this, there was no reason at the time of the '91 action to attack the validity of claim No. 1 nor could any reason to launch such attack have been reasonably foreseen. Apotex said that the grounds for invalidity of claim No. 1 was now sought to be asserted and the evidence in support of invalidity were unknown to Apotex at the time of the trial. Apotex said Merck did not seek, nor was it awarded, a declaration of validity of any claims.
[21] In its motion for reconsideration, Apotex refers to an action about to be commenced by Apotex and Signa S.A. de C.V. This other action will be referred to later in these reasons.
[22] MacKay J. dismissed Apotex's application for reconsideration with written reasons reported at (1998), 78 C.P.R. (3d) 376.
[23] As I see it, MacKay J. reasoned as follows:
| (1) By its terms, Merck's statement of claim is broader in its application than a concern exclusively with Apotex's enalapril maleate tablets. Merck sought protection of the full scope of its patent, as defined by the claims specified. |
| (2) There was an acknowledgement at the hearing of the motion for reconsideration that challenging the validity of claim 1, and other compound claims, was considered by Apotex though not in depth, in pre-trial preparation but ultimately was not pursued under Apotex's amended defence. There was no evidence at all of any agreement or understanding between the parties that the validity of claim 1 or other claims not questioned at trial was reserved, or even that it was believed then by Apotex to be reserved, for consideration at a later time. |
| (3) The decision not to question the validity of claim 1 or other compound claims in the Merck patent at trial was a decision by Apotex. On this basis, MacKay J. said he dealt at trial with the issues not as they were intended or framed exclusively by Apotex but as they were framed under the pleadings of both parties. That included Merck's claim for relief against alleged infringement of claims 1 to 5 and 8 to 15 and Apotex's counterclaim, questioning only the validity of Merck patent claims 8 to 17, aside from its defence pursuant to section 56. Merck was able to point to comments of its counsel at trial, in opening remarks and, in closing submissions, referring specifically to Apotex's concessions of validity of the compound claims 1 to 5, comments not then disputed on behalf of Apotex. |
| (4) Finally, in the amended defence, by paragraph 2, Apotex conceded, subject to section 56 and the availability of licensed enalapril maleate, that Merck was entitled to the exclusivity granted under the Patent Act except claims 8 to 11 albeit a concession framed "for the purpose of the within action only"; this concession included the "exclusivity, under the Patent Act arising from claims in the patent which were not contested for the validity, including claim 1". |
[24] MacKay J. concluded at page 386:
| Implicitly, the validity of that claim, supported by the Act and not questioned by Apotex, underlies the finding of infringement and the injunction order so far as those relate to claim 1. Moreover, Apotex, already has, in this action, contested the validity of claims 8 and 11, and it lost that contest. Though admittedly its arguments about validity of those claims would now be different, it is not within authority of this Court to reopen trial of matters disposed of at trial simply because an argument not advanced at trial might now be made, if permitted. |
| In my opinion, whatever authority this Court may have to vary a judgment, that does not extend to reopening trial of issues disposed of expressly or implicitly in reaching the judgment now sought to be varied. Thus the relief sought by Apotex to vary the terms of the injunction and direct trial of issues now raised is simply not within this Court's jurisdiction. There would be no end of litigation if a party were free to reopen a trial of issues once disposed of because a circumstance not contemplated at the time of trial has now come to its attention. The general principle is that there be an end to litigation between parties. Aside from exceptional circumstances, a trial is a once and for all time event, settling the issues raised, as between the parties, for all time, subject only to variation on appeal, or within the narrow circumstances within the Court's Rules for a change by the trial judge. |
| That principle precludes this Court from reopening the trial for consideration of issues that might have been raised and were not, for whatever reason, and that now have been implicitly determined by the judgment following trial. [emphasis mine] |
[25] MacKay J. also mentions the fact that in January 1996, Apotex made a further application to the Court of Appeal pursuant to then Rule 337 to vary the terms of judgment as amended. That motion was dismissed in March 1996. In dismissing the application, the Court of Appeal commented, in relation to the injunction ordered by paragraph 3 of the judgment, as amended, as follows:
| Paragraph 3 of the Trial Judgment, as amended by this Court's Judgment of April 19, 1995 broadly restrains and enjoins the appellant from infringing claims 1 to 5 and 8 through 15 inclusive of Canadian Letters Patent 1,275,349". The phrase in that paragraph beginning with the words "and in particular" does not in any way cut down the broad scope of the injunction granted in the opening words of the paragraph. |
| (c) Apotex Inc. and Signa S.A. de C.V. and Merck & Co. Inc. " T-2869-96, filed April 15, 1997 |
[26] In this new action by Apotex and Signa which carries on business in Mexico as a manufacturer and distributor of chemicals used in the manufacture and drugs for human consumption, seek a declaration that claims 1, 8 and 11 of the Merck patent are invalid, void and of no force and effect. Under a heading called "New Development After Trial of Action No. T-2408-91", Apotex and Signa say in their statement of claim:
| 19. Following the trial of action no. T-2408-91, Apotex became aware of the availability for purchase of compounds which it may be asserted fall within the scope of claim 1 of the Merck Patent but not claims 2 to 5, such compounds being available from Signa. Apotex wishes to purchase, use and sell such compounds and Signa wishes to supply such compounds to Apotex and to others in Canada. |
| 20. Any ground now discovered by Apotex and Signa that would invalidate claim 1 but not claims 2 to 5 is thus now relevant, although not relevant at the time of the trial of action no. T-2408-91. |
| 21. In view of the foregoing, Apotex and Signa have brought this action seeking a declaration that claim 1, and those claims dependent upon claim 1, other than claims 2 to 5 and claims dependent on claims 2 to 5 (namely, claims 8 and 11 of the Merck Patent), are invalid by reason of the matters hereinafter detailed. |
| (b) That the number of compounds covered by claim 1 of the Merck Patent is so large that it is impossible that anyone could ever make and test all of them; |
| (c) That there was not any sound basis for predicting the pharmaceutical utility of the entire class of compounds covered by claim 1 of the Merck Patent; and |
| (d) That, in fact, many, if not most, of the compounds covered by claim 1 of the Merck Patent are not useful. |
[27] The defendant Merck brought a motion pursuant to Rule 221 to strike out the plaintiffs' statement of claim. The matter was considered by my colleague Muldoon J. who issued written reasons on April 28, 1999. He ordered the statement of claim struck out on the basis of abuse of process.
[28] As I read Muldoon J.'s reasons for judgment, he focussed on an argument put forward by Merck pleading res judicata. Muldoon J., after analyzing the jurisprudence on res judicata, said this at paragraph 25 of his reasons:
| [25] From this, it is apparent that the application of the doctrine of res judicata does not depend on whether the parties actually raised the issue or issues in previous proceedings, but rather whether the parties could have done so. Should a party choose to drop certain issues for reasons of tactics, strategies, or otherwise, the party seals its fate with regard to those decisions. Parties must bring forward their whole case, and will not be permitted to litigate by instalments in piecemeal fashion. It is a principle of law and also of policy that there be finality to court decisions: see also Grandview v. Doering, [1976] 2 S.C.R. 621">[1976] 2 S.C.R. 621 at 634 and 636. Parties to litigation must be able to rely on the finality of final judgments so that they can adjust their affairs, if necessary, and conduct themselves accordingly. |
[29] Muldoon J. concluded at paragraph 27 of his reasons:
| [27] In the instant case, with the exception of Signa, the parties are the same. The previous proceedings which form the basis of Merck's claim to res judicata are final and the Court in that case has refused to reopen or revisit the matter. The issue, as well, has also been decided in the previous proceeding, when the Court found that the claims now attacked were valid and infringed. Accordingly, Merck's argument as to res judicata must succeed. |
THE CURRENT PROCEEDINGS " Apotex Inc. v. Merck " court file T-294-96, February 5, 1996
(a) The statement of claim
[30] This statement of claim issued by Apotex also concerns the Merck patent. Apotex's statement of claim refers to the '91 action and says this about the Federal Court of Appeal's decision:
| 11. The Federal Court of Appeal allowed, in substantial part, Apotex' appeal of the Judgment of Mr. Justice MacKay. In its Judgment issued April 19, 1995, as amended, May 16, 1995, the Federal Court of Appeal found that Apotex was liable for infringement in respect of, and was enjoined from selling, enalapril maleate tablets made from three specific lots of enalapril maleate that were found not to have been acquired by Apotex prior to the issuance to the Merck Patent and one lot that was not protected by licence. |
[31] In its statement of claim, under a heading entitled "New Material", Apotex says this:
| 12. Following the trial of action T-2408-91, Apotex became aware of the availability for purchase of further bulk enalapril maleate. This further enalapril maleate was manufactured and sold under licence. |
| 13. Apotex purchased this licensed bulk enalapril maleate and has formulated same into enalapril maleate tablets for sale for consumption in Canada. [emphasis mine] |
[32] Apotex claims in the present action:
| (a) a declaration that Apotex' manufacture and sale of enalapril maleate tablets from licensed bulk enalapril does not infringe the Merck patent; |
| (b) a declaration that Apotex is not liable for infringement of the Merck Patent by reason of the manufacture and sale of enalapril maleate tablets from licensed bulk enalapril. |
| (b) Amended statement of defence and counterclaim by Merck |
[33] Merck's amended statement of defence and counterclaim in the present action are dated May 27, 1999. I need not describe, for the purposes of these reasons, in depth, Merck's statement of defence. Merck takes issue with Apotex's characterization of the result and effects of the previous proceedings and specifically focusses on the determinations made by MacKay J. and the Federal Court of Appeal on the acquisition of enalapril maleate either from Delmar directly or indirectly from one of the customers of Delmar subsequent to the trial of action T-2408-91. Merck pleads res judicata. Merck, in defence, pleads Apotex's action is frivolous, vexatious, without merit and an abuse of the process of this Court.
[34] Merck in counterclaim to Apotex's present action:
| (1) repeats the allegations of its statement of defence. |
| (2) asserts, as presently known to Merck that on or about May 26, 1994 and October 10, 1994, Apotex acquired, from undisclosed, unlicensed sources, quantities of bulk enalapril maleate compound totalling 772.9 kilograms manufactured by Delmar, during the term of the compulsory licence. |
| (3) says the acquisitions of bulk enalapril maleate by Apotex occurred after the rights of Delmar Chemicals Inc. under the compulsory licence were terminated and extinguished by statute on February 14, 1993. |
| (4) asserts the full extent of Apotex's acquisitions of quantities of bulk enalapril maleate compound from undisclosed, unlicensed sources subsequent to the termination and extinguishment of the compulsory licence on February 14, 1993 is at present unknown to Merck but is within the knowledge of Apotex. |
| (5) claims that Apotex formulated the quantities of bulk enalapril maleate compound so acquired from unlicensed sources subsequent to February 14, 1993 into APO-ENALAPRIL tablets at its premises in Weston, Ontario, and sold the tablets to wholesalers, pharmacies and distributors throughout Canada and elsewhere, for use in the treatment of hypertension and congestive heart failure. |
| (6) Merck claims Apotex infringed the exclusive rights of Merck and, in particular, claims 1 to 5 and 8 to 15 of the Merck patent and to the extent Apotex has formulated quantities of enalapril maleate so acquired into pharmaceutical dosage form tablets for sale and/or sold the tablets in Canada and elsewhere subsequent to the delivery of the reasons for judgment of the Trial Division and the Federal Court of Appeal, Apotex has knowingly and willfully breached the permanent injunction of the courts. |
[35] Merck, by counterclaim, seeks in this action the following:
| (a) a declaration that Apotex has infringed claims 1 to 5 and 8 to 15 of the Merck patent in respect of at least the 772.9 kilograms of bulk enalapril maleate acquired subsequent to the trial of the '91 action. |
| (b) Merck also asks for an order to deliver up all remaining enalapril and enalapril maleate in bulk or dosage form in the possession and control of Apotex that infringes the Merck patent; and |
| (c) Merck claims damages and accounting as well as exemplary and punitive damages for knowingly and willfully breaching the permanent injunction of the court. |
| (c) Apotex's reply and defence to Merck's counterclaim |
[36] This reply was filed on June 28, 1999.
[37] Under the heading described as "Licensed Material", Apotex says this:
| (a) on April 24, 1992, Delmar was granted a compulsory licence under the Merck patent; Delmar manufactured and sold bulk enalapril maleate in accordance with the terms of that licence; that licence, on February 14, 1993, was extinguished pursuant to the Patent Act; |
| (b) following the trial of the 1991 action, Apotex acquired bulk enalapril maleate previously manufactured and sold under the Delmar licence. All such material remained licence material irrespective of the extinguishment of the Delmar licence; Apotex pleads and relies upon subsection 12(2) of the Patent Act Amendment Act, 1992, Apotex denies that it has infringed Merck's patent or breached any order or decision of the Court in the 1991 action or appeal therefrom; |
| (c) in terms of res judicata, Apotex denies that the action was res judicata by reason of any judicial proceedings in the 1991 action or appeal therefrom and denies that it acted in any manner which prevents it from bringing this action against Merck. |
[38] In its defence to counterclaim, Apotex repeats and relies upon the allegations in its statement of claim and reply. Under a heading entitled "No Infringement of Merck Patent" Apotex states the following:
| 11. Contrary to the allegations contained in the Counterclaim, Apotex states that it did acquire, and subsequently formulate into tablets, licensed bulk enalapril maleate as described in the Statement of Claim. |
| 12. Apotex further states that the extinguishment of the Delmar licence had no bearing whatsoever upon any bulk enalapril maleate previously manufactured and sold under the Delmar licence. Such bulk enalapril maleate remained licensed material. |
| 13. By reason of the foregoing, Apotex denies that it has infringed the Merck Patent or thereby breached any order or decision of the court in action no. T-2408-91 or appeal no. A-724-94. |
[39] Under the heading entitled "Invalidity of the Merck Patent" Apotex says this in paragraph 14 in defence to the Merck counterclaim which is the subject matter of Merck's strikeout motion before me:
| 14. In the alternative, if the material acquired by Apotex as aforesaid was not licensed material, the principle of licensee estoppel and inapplicable Apotex pleads that the Merck Patent and claims thereof are invalid, void and of no force and effect by reason of the following. [emphasis mine] |
[40] Apotex then proceeded to enumerate a number of grounds in support of its claim for invalidity of the Merck patent.
ANALYSIS
[41] Apotex's paragraph 14 of its defence to Merck's counterclaim attacks the validity of Merck's patent. Merck seeks to strike out that paragraph on the basis of res judicata. The applicable principles of res judicata are established in two Supreme Court of Canada decisions namely: [1975] 2 S.C.R. 248">Angle v. M.N.R., [1975] 2 S.C.R. 248 and [1976] 2 S.C.R. 621">Doering v. Town of Grandview, [1976] 2 S.C.R. 621.
[42] In [1975] 2 S.C.R. 248">Angle, supra, Dickson J., as he then was, distinguished two forms of res judicata estoppel: cause of action estoppel and issue estoppel. Both forms of estoppel are based on policy: first, the interest of the state that there should be an end to litigation and, second, the hardship on the individual that he should be vexed twice for the same case.
[43] Cause of action estoppel precludes a person from bringing an action against another when that same cause of action has been determined in earlier proceedings by a court of competent jurisdiction.
[44] Issue estoppel is wider because it is applicable where different causes of action exist; it is said to arise when three conditions are met:
| (a) The same question has been decided; |
| (b) The judicial decision which is said to create the estoppel is final; |
| (c) The parties to the judicial decision or their privies are the same persons as the parties to the proceedings in which the estoppel is raised. |
[45] Dickson J., in [1975] 2 S.C.R. 248">Angle, supra, cautioned that issue estoppel does not arise if the question arose collaterally or incidentally in the earlier proceedings " the question must be fundamental to the decision arrived at.
[46] In my opinion, it is plain and obvious that Merck's motion to strike meets the conditions for issue estoppel. First, the question of the validity of the Merck patent, for the purposes of the present action, has been decided in the 1991 action. As was found by both MacKay J. on the motion for reconsideration and Muldoon J. in action T-2869-96, Apotex cannot now re-litigate piecemeal the issue of the invalidity of Merck's patent on different grounds. Moreover, the issue of the invalidity of Merck's patent was fundamental to the decision reached in the 1991 action and the declaration and remedies awarded, namely, that the Merck patent had been infringed by Apotex in relation to specific lots of bulk enalapril maleate and 44.9 kilograms of enalapril maleate which was purchased by Apotex from Delmar in March 1993 after the compulsory licence held by Delmar was extinguished by statute. In addition, an injunction issued restraining Apotex from infringing claims in the Merck patent and, in particular, from manufacturing, using, offering for sale and selling, in Canada or elsewhere, APO-ENALAPRIL tablets or other dosage of forms containing enalapril maleate related to specific lots and the 44.9 kilograms purchased from Delmar.
[47] The second condition is met because the judicial decision is final. Leave to appeal was denied by the Supreme Court of Canada with respect to the finding of the Federal Court of Appeal although, as I understand it, Apotex has appealed MacKay J.'s decision on reconsideration and Muldoon J.'s decision in T-2869-96. I do not view such appeals as a reason to hold off striking out a res judicata claim in this action. The parties in the present action are the same as in the '91 action and therefore the third condition has been met.
[48] Apotex urges that it is entitled to raise the invalidity of Merck's patent anew based on the principle of licensee estoppel which is said to arise in this action because the bulk enalapril maleate was a licensed product when manufactured and sold by Delmar before it was acquired by Apotex. The principle of licensee estoppel was defined in Bayer v. Apotex Inc. (1995), 60 C.P.R. (3d) 58, and arises in the context of an action between a licensor and a licensee. The principle of licensee estoppel, as I understand it, prevents a licensee from challenging the validity of the licensor's licence because they are parties to the same licence agreement but there is an exception in certain circumstances where the licensor sues the licensee for infringement alleging the licensee acted beyond the terms of the licence.
[49] There are two reasons why, in my view, Merck's application to strike should succeed despite Apotex's licence estoppel plea. First, assuming that Apotex is entitled to claim the exception to licensee estoppel, in my view, that exception (the ability of the licensee to attack the validity of the licensor's patent) would not operate in this case because that very issue has been decided in a previous proceeding. The very essence of issue estoppel is to prevent a person in a different proceeding with a different cause of action from re-litigating a decided question. Apotex cannot come in the back door through the licensee estoppel exception. Second, as I see it, there is no licensor/licensee relationship between Merck and Apotex in relation to the bulk enalapril maleate in question. There was one between Merck and Delmar but that relationship was extinguished by statute.
[50] In view of the conclusion reached, there is no necessity for me to deal with Merck's alternative argument that cause of action estoppel exists in the circumstances of this action. I also need not deal with Merck's request for particulars in relation to paragraph 14 of Apotex's defence to Merck's counterclaim.
DISPOSITION
[51] For all of these reasons, paragraph 14 of Apotex's defence to Merck's counterclaim in this action is struck with costs.
"François Lemieux"
J U D G E
OTTAWA, ONTARIO
NOVEMBER 5, 1999
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